Picture: ISTOCK
Picture: ISTOCK

Direct investment is one of the vital cogs needed to drive the machinery of our economy, helping it move more efficiently and productively. Whether it comes from the government, private citizens overseas, corporates or local organisations, direct investment is needed to stimulate the economy, inject it with new zest and push out the growth curve.

The withholding of investment is a sure sign of either a lack of confidence in the future or apprehension shown by investors over the health of the economy.

Our economy has in fact been grinding slowly to a halt for a number of years due to issues ranging from policy uncertainty to the reluctance of the ANC government to make the deep structural reforms that are required.

The SA Reserve Bank recently downgraded its GDP growth forecast from 1.7% to 1.2% for 2018.

In line with this, the government needs to produce legislation and policy that is transparent and reassuring for foreign direct investment (FDI) to help our economy.

The crux here is around property, where the ANC’s proposed change to section 25 of the constitution to explicitly enable expropriation without compensation will then apply equally to all foreign investors.

The Protection of Investment Act is ostensibly one such piece of legislation. However, instead of encouraging investment it has been written to discourage it. The irony of this act is that it also does little to protect what investment does take place.

The act, which only came into force a few weeks ago through the publication of a commencement notice by President Cyril Ramaphosa, was signed by him a few weeks before that.

However, this legislation goes further back to 2015, when it was first produced under former president Jacob Zuma’s administration.

Businesses from foreign countries raised concerns with parliament in November 2015 — particularly our largest trading partners, the European Chamber of Commerce and the American Chamber of Commerce — that the signing of this act would lead to the freezing of new investments into SA.

In crude terms, it means foreign investors will have less security on their investments and less protection when it comes to government decisions and the constitution. Foreign investors will need to exhaust all local avenues before approaching overseas arbitrators. This means that foreign companies could be tied up in litigation in SA for years before remedy is awarded.

The crux here is around property, where the ANC’s proposed change to section 25 of the constitution to explicitly enable expropriation without compensation will then apply equally to all foreign investors.

It is a scary proposition for any investor to face, creating further policy uncertainty and leading to continued withholding of investment.

Ramaphosa appointed a team of business and finance experts to scour the globe for $100bn of investment to stimulate our economy. One of these investor ambassadors is former finance minister Trevor Manuel.

He has come out recently and stated in strong terms that it has been hard to sell SA amid uncertainty over property and that explaining SA’s land debate had been tougher than expected. Many investors are concerned that the radical move on expropriation without compensation could harm property rights, the financial sector and food security.

The act thus does not provide adequate protection for foreign investors and will be an added reason for investors to look elsewhere or disinvest from SA. What the country needs now is as much foreign investment as possible — to create jobs, support the rand and help our economy recover.

Yet the entire investor community unanimously condemned this act as bad for investment and bad for SA.

According to the World Investment Report 2018 by the UN, FDI to SA has fallen 41% to $1.3bn due to an underperforming commodity sector and political uncertainty. This includes the delayed energy regulation and Mining Charter, along with the land debate.

FDI outflows from SA hit $7.4bn in 2017, up 64%.

Ramaphosa has failed to quell investors’ concerns and disquiet. What he has done instead is in magician parlance called sleight of hand. He recently returned from Saudi Arabia, where a $10bn investment in our energy sector was promised.

And as recently as Sunday, in an address to business leaders in Beijing‚ during a state visit hosted by Chinese President Xi Jinping, he said SA is being "recalibrated" to be attractive to local and international investors in a bid to stimulate economic growth and job creation.

Yet at the same time he has ratified the Protection of Investment Act. Perhaps the hope is that we will be distracted from its significance. The people of SA must constantly be vigilant — the country needs pro-investment decisions and transparency, not deceptive ANC manoeuvres that harm investment and job creation.

• Macpherson, MP, is DA shadow trade and industry minister